2of 4Congressman Joaquin Castro speaks during a hearing on "The Need for Comprehensive Immigration Reform in Texas and the Nation" on Monday, July 29, 2013, in Houston. ( J. Patric Schneider / For the Chronicle )Photo: J. Patric Schneider, Freelance

3of 4Congressman Henry Cuellar speaks during an interview at his parent's home in Laredo, TX on Sunday, Sept. 14, 2014.Photo: Victor Strife, Photographer

WASHINGTON - Pressure is mounting on the Obama administration to authorize oil exports to Mexico and put the United States' southern neighbor on the same legal footing as Canada.

Texas Democratic Reps. Joaquin Castro and Henry Cuellar are among the latest to advocate the move, which would deepen the United States' business and trade relationship with Mexico, while providing another outlet for the light crude surging out of wells in the Lone Star State.

Though it falls far short of domestic oil producers' call to repeal the 1975 ban on crude exports, the proposed change would build on a series of exceptions that already have been carved out over decades. The move could prove to be a key political step toward the U.S. eventually emerging as a major global exporter of oil, said George Baker, executive director of the lobbying coalition Producers for American Crude Oil Exports.

"Providing Mexico the same status as Canada would be a step in the right direction," Baker said. "Opening new markets for domestically produced light oil would put Americans to work, spur additional investment here at home and enhance our trade balance."

Cuellar said soaring domestic crude production means it is time to reconsider the export ban imposed after the 1973 oil embargo that created massive fuel shortages in the U.S.

"We've been operating under an outdated law that's been on the books for over 40 years," Cuellar said in an interview. "We can understand at that time it probably was the right thing to do, but I think things have changed, and technology has changed."

Delicate balance

Several Texas lawmakers are seeking to strike a delicate balance on the oil export debate. Producers are clamoring to expand their business overseas, while refiners are wary of changes that could lift domestic oil prices and weaken their competitive advantage over their European competitors.

Cuellar and Castro face those pressures in their districts, as they support exports to Mexico and consider the merits of repealing the export ban. Cuellar's district encompasses much of the prolific Eagle Ford Shale. Castro, in turn, represents the 20th congressional district west of San Antonio that includes the headquarters of Valero Energy Corp., the nation's largest independent refiner.

Cuellar recently became the first Democrat to sign legislation from Rep. Joe Barton, R-Ennis, that would repeal the ban, joining 20 other cosponsors. But Cuellar stressed that his decision is designed to ensure he remains part of the debate, positioned to lobby for changes that could insulate refiners as part of any broad export deal.

"This is a situation where nobody is going to win 100 percent," he said, "but we (can) go to the table and understand that we have to have some sort of concerns addressed. I want to have a seat at the table to explore the options."

U.S. oil producers see exports as a chance to prop up the domestic price for their commodity that trades at a discount to international benchmark Brent crude. While U.S. law bars broad exports of raw, unprocessed crude, it does not limit foreign sales of gasoline and other refined petroleum products.

Domestic refiners have taken varying approaches regarding the oil export ban. Some insist that lawmakers should first eliminate biofuel mandates, which add to refining costs, refiners said. Also, refiners want Congress to eliminate the Jones Act rules that allow only American-built, -owned and -operated vessels to travel among U.S. ports. They say the restrictions give foreign competitors a significant cost advantage.

Valero CEO Joe Gorder says all of the policies hindering free and open oil markets need to be addressed - not just crude export constraints.

"We believe that looking at a specific issue relative to the overall issue is just not the right way to deal with this topic," he said on an earnings call Tuesday. "You need to deal with all of the issues."

Tesoro has adopted a slightly different position, with Vice President of Government Affairs Stephen Brown emphasizing the company's support for "free trade and free markets."

"Tesoro believes that Congress should undertake a comprehensive review of other statutes that inhibit these activities in the energy sector, such as the Jones Act and the Renewable Fuel Standard," Brown said. "Tesoro does not, however, condition our support for relaxing the domestic petroleum export restrictions on reforming or repealing these other statutes."

Castro has floated the idea of a grand bargain on crude exports, under which any changes on oil trade could be linked to policies - such as tax incentives - that encourage alternative energy.

"There is a way for everyone to benefit, including Texas consumers and businesses," Castro said in an interview. But "it's not going to be an easy balance."

Castro stressed that he is "approaching this with an open mind" but does not support lifting the ban "carte blanche."

"I've tried to be reasonable, but also somebody who sees an opportunity for the consumer to be protected and for alternative energies also to benefit," he said.

Canada and Mexico

Current law already allows limited crude exports - mainly those involving some Californian and Alaskan supplies and shipments to Canada. Mexico's state-owned petroleum company, Pemex, has asked U.S. Commerce Department officials to approve an exchange of its heavy crude for higher-quality, lower-sulfur U.S. oil.

Castro, Cuellar, Rep. Michael McCaul, R-Texas, and two other lawmakers told the president in a letter Friday that blessing a single deal doesn't go far enough; instead, they insisted, he should authorize all oil exports to Mexico.

Former President Ronald Reagan carved out the similar exemption for Canada in 1985 when he declared oil exports to the North American ally were in the U.S. national interest. "Ultimately, we should treat Mexico just as we do Canada," Castro said.

The push on Mexico isn't distracting oil export proponents from their broader campaign, as they work to amass a broad spectrum of cosponsors behind Barton's bill.

But they are up against strong political headwinds. Lawmakers facing voters at the polls in 2016 fear they will be blamed for backing oil exports whenever gasoline prices inevitably climb, though several think tank studies conclude that selling crude overseas would drive fuel costs down.

A House Foreign Affairs subcommittee could amend and vote on Barton's bill within weeks. But GOP House leaders want to see a broader base of support - with Democrats and Republicans on board - before they aggressively push it through the chamber.

Seeking endorsements

That is putting lawmakers from Texas and other oil-producing hotspots in the hot seat.

Among the targets are Houston Democratic Rep. Gene Green and Sugar Land Republican Rep. Pete Olson, both of whom are still weighing the issue. Oil producers also are courting Texas Republicans who have not signed on to Barton's bill, including Reps. Lamar Smith and Will Hurd, both from the San Antonio area.

Any endorsements from Olson, or Rep. Cedric Richmond, D-La., who serves as co-chairman of the congressional refining caucus, would be seen as particularly significant, potentially weakening the argument that oil exports would harm the sector that generates the nation's gasoline, diesel and jet fuel.

A spokeswoman for Olson said the Republican lawmaker is listening to the ongoing debate and gathering information to understand all potential impacts of authorizing broad oil exports.

Green, whose Houston ship channel district includes several refineries, noted the Commerce Department is reviewing Pemex's application and has signed off on companies' bid to export an ultra-light oil known as condensate after minimal treatment.

"We don't need to do away with our current system, but we do need a system that works efficiently and effectively," Green said. "There may be a way to address the larger export issue in a sensible way, but there currently isn't any legislation that proposes a middle ground."